Monday, December 9, 2013
By Tux Turkel email@example.com
Maine's Public Utilities Commission is trying to determine whether the state's largest competitive electricity provider has used false or misleading advertising to attract and keep customers.
Among other things, the agency is looking into whether Electricity Maine LLC developed radio ads that gave the impression that its rates for homes and small businesses are lower than the state-sponsored standard offer. The Auburn-based company has more than 185,000 customers in Maine and 55,000 in New Hampshire.
The PUC action is a request for information, not a formal investigation. Electricity Maine is preparing its response.
In an interview with the Portland Press Herald, the company's president, Kevin Dean, said he's no longer trying to beat the standard offer. Rather, he said, Electricity Maine is pitching stable, longer-term rates from a local company that supports the community.
"We're going to offer you a fair deal, year in and year out, and we're going to give back," he said.
The PUC's inquiry, and Dean's remarks, show how Maine's competitive energy market for home customers is evolving. At least seven companies are licensed by the PUC as competitive energy providers for homes and small businesses, each with deals and offers that can change at any time.
That level of competition is a relatively new development for electricity in Maine. As with long-distance and mobile phone service, consumers must understand what they're buying and stay on top of changes, said Eric Bryant, senior counsel in the Maine Public Advocate's Office.
"People have to be aware that this market isn't regulated," he said. "People have to take care to protect themselves, if they dip into this market."
Bryant's office maintains a Web page that helps consumers compare electricity providers, at:
Electricity Maine grew by offering rates that undercut the standard offer for Central Maine Power Co. home customers. For instance, last fall, Electricity Maine offered a rate that was 5 percent below the standard offer, which was 7.4 cents per kilowatt hour. A typical home customer could expect to save about $1.50 a month on the average energy charge of $38.55.
The standard offer, which is approved by the PUC, changes annually in March. The rate can go up or down, depending on bids from wholesale power generators. On March 1 of this year, the rate went down by about 8 percent for CMP home customers, to about 6.8 cents. That new rate is in effect until next March.
Many Mainers are dipping into the competitive market, primarily to save money. About four in 10 CMP home customers are getting their electricity from a source other than the standard offer, compared with fewer than one in 10 just two years ago.
Maine's electricity industry has been deregulated for 13 years, separating energy supply from delivery services. Large businesses have long been shopping around for power supply. But it wasn't until last year that competition heated up for home customers, a market pioneered in 2011 by Electricity Maine.
Around the time the standard offer was due to drop, a PUC staff member heard radio ads for Electricity Maine. That triggered the inquiry. A key concern to the agency is reflected in a written question to Dean, from Mitchell Tannenbaum, the PUC's general counsel.
Tannenbaum wrote: "Please confirm that it is Electricity Maine's position that its radio promotions during the period of February 1, 2013, to March 31, 2013 (except for possible mistakes by the radio station) did not include a statement to the effect that if your power bill says standard offer, you're paying too much."
Dean is still preparing his written response. He told the Press Herald that he advertises on about 30 radio stations. The ads include "talking points" for disc jockeys and five-second "blinks," such as: "Electricity Maine offers the power to save and is Maine's best choice for a power provider!"
In the winter, Electricity Maine began changing the focus of its advertising, Dean said. It shifted from price competition to other benefits of signing up, such as the company's fund that helps organizations in the Lewiston-Auburn area, including the United Way and Androscoggin Home Care & Hospice.
It's possible that some radio stations didn't update the ad copy quickly enough, Dean said. But it's hard to know, because the ad campaign involved thousands of spots over the time period. Recently, Dean said he sent the stations a note reminding them to keep the ad copy current.
"It's our intent to make sure what we're running is accurate and factual," he said. "But it's not as simple as turning things on and off."
One thing is clear in the three rate options on Electricity Maine's website: The company's latest rates don't beat the standard offer of about 6.8 cents per kilowatt hour.
The leading rate plan is called MaineStrong. "Our most popular rate, providing extended protection," the ad copy says. It has a term of 18 months and is set at 7.58 cents.
Although that rate is nearly a penny per kilowatt hour more than the standard offer, 70 percent of new customers over the past 30 days have chosen it, said Dean.
"I don't know why," he said. "Is it because they want to help their communities and create jobs, or want a fixed rate for 18 months?"
The second option is called MaineSafe. "Longer term, helps guard against rising electricity rates over the next year," the copy reads. It's a 12-month fixed rate, at 7.78 cents, almost a penny over the standard offer.
Dean was asked if the claim is misleading, considering that standard offer rates stay the same for a year so there's no danger that they will rise.
His explanation: It's nearly June, and the standard offer rate could rise in less than 10 months. MaineSafe guards against that possibility.
The third option is called MaineSaver. It's a six-month fixed rate that's basically on par with the standard offer, at 6.8 cents. "Our lowest fixed rate -- enjoy savings now!" the copy reads.
Comparing the claims is tricky, said Derek Davidson, director of the PUC's consumer assistance division. The standard offer could rise next year. If that happened, Davidson said, a consumer who signed up today for MaineSafe could pay less, but only for the two months after March of 2014.
"This is what we're trying to look at," Davidson said. "We're walking a fine line. We want them to be able to market, but we want them to be truthful."
The PUC also is trying to understand whether Electricity Maine's contract renewal policy automatically signs up a customer for another year, even if the new rate is higher. PUC rules require written notice, 30 to 60 days before a contract expires, but they don't spell out that the supplier must disclose the new rate, Davidson said.
Dean said Electricity Maine notifies customers of the expiring term, and does specify the new rate. But he said he thinks many people actually want longer-term contracts, regardless of a rate change, and he's trying to secure a two-year energy supply.
The challenge is getting suppliers to commit to a long-term price in today's volatile energy market, he said. He has been working most recently with Noble Americas Energy Solutions, a large power retailer in San Diego.
"People want to know they're getting a fair and competitive rate, and they don't want it to move around," Dean said.
The PUC maintains a Web page devoted to questions about competitive energy providers, at:
http://www.maine.gov/tools/ whatsnew/index. php?topic =puc -faq&id=454603&v=article
The PUC and the Public Advocate's Office say they have gotten relatively few complaints. But electricity prices are tied strongly to the price of natural gas, which is used to generate half the power in New England. Falling wholesale gas prices helped lower the standard offer over the past two years, but that trend is changing direction.
That's why electricity customers should keep an eye on their contracts, and check the rates and terms for any automatic renewal, said Bryant in the Public Advocate's Office.
"If there's automatic renewal at a higher rate, there are going to be a lot of unhappy people," he said.
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